Global stocks dropped in May on concerns that Greece may leave the euro-zone, while growing anti-austerity sentiment in France and southern Europe eroded confidence that EU leaders can contain Spain's debt and banking woes. Europe's erosion essentially sparked elevated fears for a longer worldwide economic slowdown, including an easing of momentum in the United States. The month ended with a downward revision of the U.S. GDP growth rate for the first quarter to 1.9% from 2.2%. The benchmark S&P 500 fell just over 6% last month, its worst May performance in two years and largest monthly decline since September 2011. The Dow Jones Industrial Average shed over 820 points (-5.8%), while the technology-focused NASDAQ Composite declined more than 7%. Small-cap stocks fared no better, as the Russell 2000, a proxy for small-cap equities, sank 6.6%. As oil inventories reached a 22-year high, crude oil futures fell nearly $19 to $86.53 per barrel (-17.8%), its biggest monthly decline since 2008.

In U.S. sector performance, eight of the ten S&P 500 major market groups delivered negative May returns with six sectors falling more than 5%. Energy (-10.2%) and Financials (-9.1%) suffered the biggest setbacks as oil plunged and JPMorgan's $2B trading blunder caused its shareholders to lose over 22% of their value. Losses in Materials (-7.8%), Technology (-7.7%) and Industrials (-6%) also characterized the extent of investors cashing in profits and moving to the sidelines. Only Telecom and Utilities delivered gains last month, up 2.6% and 0.6% respectively. For the year, Consumer Discretionary (+10.8%), Telecom (+10.4%) and Technology (+10.1%) are the top sector performers.

As bad as it was in the U.S., overseas market performance was much worse. The MSCI EAFE Index, representing 22 of the world's 24 developed markets, but excluding the U.S. and Canada, sank 11.4% in May. Emerging markets similarly sold off, as the MSCI Emerging Markets Index fell 11.2% last month, its worst May decline since 1998. The so-called BRIC index that measures performance of stocks in Brazil, Russia, India and China entered a bear market as the gauge retreated 21% from its 2012 peak on March 2nd. Gold prices fell for a fourth straight month, falling $104 (-6.3%) to $1560.43 per ounce. Gold retreated as the US dollar strengthened against most world currencies and as India, the world's largest gold buyer, continued to experience economic slowing.

While the May selloff erased more than $4 trillion in worldwide equity valuations, investors sought out the relative safety in U.S. government debt. Buyers of the benchmark 10-year Treasury note stirred a May price rally that pushed its yield down over 35 bps to a post-World War II record low of 1.56%.

U.S. investment grade bonds edged higher last month, as measured by the 0.9% gain on Barclays US Aggregate Bond Index. Municipal bonds, as measured by the Barclays Municipals Index, delivered a positive return of 0.8% in May. Municipals extended their positive YTD return to 3.8% through May from the 2.9% return in April. Non-investment grade corporate bonds fell 1.3% last month, according to the Barclays US Corporate High-Yield Index. The decline trimmed its YTD gain to 5%, but remains the top performing fixed-income asset group for the year.

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